Objectives: To determine the risk of bronchopulmonary dysplasia (BPD) in subgroups of infants with and without patent ductus arteriosus (PDA) who were randomized to indomethacin prophylaxis or placebo, and to examine whether adverse drug effects on edema formation and oxygenation may explain why indomethacin prophylaxis does not reduce BPD. Study design: We studied 999 extremely low birth weight infants who participated in the Trial of Indomethacin Prophylaxis in Preterms (TIPP) and who survived to a postmenstrual age of 36 weeks. Results: The incidence of BPD in the 2 subgroups of infants with PDA was 52% (55/105) after indomethacin prophylaxis and 56% (137/246) after placebo. In contrast, rates of BPD in the 2 subgroups without a PDA were 43% (170/391) after indomethacin prophylaxis and 30% (78/257) after placebo (P [interaction] = .015). Logistic regression analysis with adjustment for prognostic baseline factors showed that adverse and independent effects of indomethacin prophylaxis on the need for supplemental oxygen and on weight loss by the end of the first week of life may increase the risk of BPD in infants without PDA. Conclusions: Harmful side effects on oxygenation and edema formation may explain why indomethacin prophylaxis does not prevent BPD even though it reduces PDA.